Outsource Magazine Issue 29 - (Page 66)

Changing Shape As buying organisations’ needs and behaviours change, so too must providers’ own strategies and offerings… Kavitha Nair Kavitha Nair is a business journalist specialising in information technology and processes. She is a graduate of the University of Mumbai. T he economic crisis may not have fundamentally changed the buying behaviour for large sourcing projects in Europe, but trends indicate that organisations want service providers to take on bigger risk in terms of service deliverables. Research firm Ovum believes that a longer sales cycle, tight budgets and the pressure on margins all indicate that the quality of service delivery will emerge to be the key battleground for the next 18 months. Vendors have taken note of this and are accordingly shaping up to meet the demands of the markets. There is a crisis of confidence in European outsourcing markets, which have witnessed reduction in the number of megadeals. “This combined with the implosion of demand for outsourcing in the UK public sector has led to the falling levels of total contract value,” says Tom Reuner, Principal Analyst with Ovum. Duncan Aitchison, Partner, EMEA, Information Services Group (ISG) also points to Europe’s sluggish start to the year following a record-breaking second half of 2011. ISG’s 2Q12 TPI Index measured total contract value (TCV) of €6.7 billion, a drop of 21 per cent from the second quarter of 2011 and 11 per cent from the first quarter of 2012. The 65 contracts the region awarded during the quarter represented a decline of 29 per cent year-over-year and 26 per cent sequentially. Aitchison says: “Going forward, we anticipate a soft third quarter, which faces an especially tough comparison with 2011.” Meanwhile, the macroeconomic uncertainty has had an influence on buyers’ behaviour. Both Harsh Muthal – CEO and Managing Partner for the strategic advisory quarter, Which faces an especially tough comparison With 2011 duncan aitchison ❛We anticipate a soft third ❜ firm for global outsourcing and investments Tholons – and Roop Singh, Vice President & North America/Europe/JAPAC Head, WCS, Wipro Technologies, touch upon the active involvement of various business functions in outsourcing decisions. These business functions now demand quicker return on investments. “Consequently,” says Muthal, “vendors need to brush up on their negotiating skills and also develop contracts that offer creative solutions and added-value propositions”. Wipro, for instance, leverages its consulting practice to bring in an understanding of the respective clients’ business drivers. “The consulting practice, which we have been building over the past four years, allows us to engage in conversations that go beyond cost optimisation to offer new value propositions,” added Singh. Competencies are the other factor that influences a buyer’s behaviour today. In the past, a service provider would offer services based on the specifics the customer had, on successful completion of which, the vendor would be awarded a long-term contract. Today the buyer expects the vendor to anticipate the trend and build competencies accordingly. The demand for industry expertise is more important now than ever. As Liz Benison, President CSC UK, observes: “The industry has thus far spoken about bringing domain-expertise best practice from industry into clients. I don’t think the industry has completely delivered on that.” CSC recognises this and has put renewed rigour and focus into taking the best practice within a specific vertical to a customer as opposed to just bringing their technology play to it. “Without change there is no innovation, creativity, or incentive for improvement. Those who initiate change will have a better opportunity to manage the change that is inevitable.” – William Pollard 66 ● ● www.outsourcemagazine.co.uk http://www.outsourcemagazine.co.uk

Table of Contents for the Digital Edition of Outsource Magazine Issue 29

Call Me Maybe?
Optimising Your supplier Portfolio
Application Development Outsourcing
Are You Fat?
The Future of BPO
Digital by Default
The Face of Finance
Procuring Excellence
The Importance of Being Secure
NOA Round-Up
Steering the Flow
Changing Shape
Legal Transformation
Getting to the Real-Life Win-Win
What’s the Point of Outsourcing?
outsourceXplores
Head-to-Head
The Legal View
Top Ten
NelsonHall Round-Up
The Oral Review
Online Round-Up
Inside Source
The Last Word

Outsource Magazine Issue 29